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Embodied learning by investing and speed of convergence

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  • Groth, Christian
  • Wendner, Ronald

Abstract

We study transitional dynamics and speed of convergence in economic growth. Based on a canonical framework the analysis revisits both “old” and “new” growth literature along three dimensions: (i) What if growth is not exogenous but endogenous and driven by learning by doing? (ii) What if technical progress is embodied rather than disembodied? And (iii) what if the vehicle of learning is gross investment as in the Arrowian tradition rather than net investment as in most recent contributions? From both a theoretical and a quantitative point of view we show that the speed of convergence (both asymptotically and in a finite distance from the steady state) depends strongly and negatively on the importance of learning in the growth engine and on gross investment being the vehicle of learning rather than net investment. And contrary to a presumption from “old growth theory”, a rising degree of embodiment in the wake of the computer revolution is not likely to raise the speed of convergence when learning by investing is the driving force of productivity increases.

Suggested Citation

  • Groth, Christian & Wendner, Ronald, 2014. "Embodied learning by investing and speed of convergence," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 245-269.
  • Handle: RePEc:eee:jmacro:v:40:y:2014:i:c:p:245-269
    DOI: 10.1016/j.jmacro.2014.01.009
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    More about this item

    Keywords

    Transitional dynamics; Convergence; Learning by investing; Embodied technical progress; Decomposable dynamics;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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